The US Treasury also issues longer debt. The main difference is maturity, and the second is whether the security pays periodic interest.
| Bills | Notes | Bonds | |
|---|---|---|---|
| Original maturity | Up to 1 year | 2 to 10 years | 20 to 30 years |
| Interest | None: sold at a discount | Coupon every six months | Coupon every six months |
| Cash flows | One, at maturity | Coupons plus principal | Coupons plus principal |
| Price sensitivity to rates | Lower | Higher | Highest |
Why maturity matters
When rates change, a longer security has more future cash flow locked in at the old rate, so its price moves more. A 13-week bill’s price moves only a little for a 1 percentage point change in rates, while a 30-year bond’s price can move by many times that amount.
The trade-off is reinvestment. A bill returns your money soon, so you must decide what to do with it again at whatever rates exist at that time. A longer security holds its coupon rate for much longer.
Key points
- Bills have the shortest maturities and no coupons.
- Longer maturities mean larger price moves when rates change.
- Shorter maturities mean more frequent reinvestment decisions.
General information only. It is not investment, legal or tax advice. Details vary by market and can change, so check the issuer’s current rules.